The Heiress

The rise of Elisabeth Murdoch.

Long overshadowed by her brothers, Elisabeth has impressed Rupert Murdoch’s associates. “She has the brains of James and the heart of Lachlan,” one says.Credit Photograph by Sofia Sanchez & Mauro Mongiello

On Saturday, July 2, 2011, a high-society traffic jam descended on the cobblestoned town square of Burford, a village sixty-eight miles northwest of London, not far from the market town of Chipping Norton. Hundreds of chauffeured cars approached a gated stone wall, which opened to a long, circular driveway and the sprawling country house of Elisabeth Murdoch, a prominent television entrepreneur and the daughter of Rupert Murdoch, and her husband, Matthew Freud, who runs what may be the most powerful public-relations firm in Great Britain. In addition to their professional accomplishments, the couple have gained renown for their lavish “Chipping Norton set” parties, which are often attended by their friend Prime Minister David Cameron, government ministers, financiers, C.E.O.s, celebrities, and newspaper editors. “You’re never likely to be bored,” the former Prime Minister Tony Blair, an occasional guest, told me. The CNN host Piers Morgan, a former editor of Rupert Murdoch’s the News of the World, once told the Daily Mail, “I’ve never seen so many people who hate each other together in one room.”

Leaders of the Conservative and Labour Parties attended the party, as did Bono, Helena Bonham Carter, and Mark Thompson, then the director general of the BBC (and now the C.E.O. of the New York Times). So did Elisabeth’s brother James Murdoch, the executive chairman of News International, the newspaper division of Rupert Murdoch’s company, News Corp., and the chairman of its BSkyB network, which rivals the BBC in scale. A more reticent and repentant man might have stayed home. In July, 2009, the Guardian had broken the first in a series of stories revealing that the News of the World had hacked the phones of the Royal Family, politicians, and celebrities and had hired a convicted criminal who was involved with corrupt police officials to dig up dirt on public figures. It was also revealed that executives at News International, which owned forty per cent of England’s daily newspapers, had paid hush money to make lawsuits go away, concealed evidence, and misled the police and Parliament.

Nevertheless, guests were still eager to court the Murdochs. And, at the party, at least, there was cause to celebrate. News Corp. had recently acquired Elisabeth’s worldwide independent production company, Shine, which had helped create such popular entertainment shows as “MasterChef.” Elisabeth seemed poised to return to News Corp., where she had worked twice previously, in various capacities. A jazz band enlivened the festivities, which lasted until morning.

“It was like ‘The Last Hurrah,’ the moment when politicians, newspaper editors, financiers, and celebrities could be together,” one guest said. “It was unbelievably generous. Extraordinary wine, extraordinary food. Everybody danced till dawn. And then everything fell off a cliff.”

Two days later, on Monday, July 4th, Nick Davies and Amelia Hill, reporters at the Guardian, revealed that the cell-phone voice mails of Milly Dowler, a thirteen-year-old schoolgirl who had disappeared in March, 2002, and whose body was found six months later, had been hacked into by the News of the World. An uproar ensued; it was, perhaps, one thing to snoop on the powerful and the wealthy, but it was quite another to take advantage of a young girl. The next week, Rupert Murdoch, who was in Sun Valley, Idaho, flew to England and apologized profusely to the Dowler family and to the public. But he defended his son James and Rebekah Brooks, the C.E.O. of News International, who supervised his four English newspapers.

Elisabeth dissented. She told a friend that she blamed James’s stubbornness “for getting her father into difficulty.” On a phone call with her father, her brothers, and her older half-sister, she urged James to resign, and Brooks with him. Invoking a public-relations adage of her husband’s, she advised James and her father to get out ahead of the bad news and avoid any hint of a coverup. In her view, they should launch an internal investigation and fully coöperate with the police. (Rupert and James Murdoch declined to be interviewed for this article, although they did answer some questions through a spokeswoman.) Within days, Rupert Murdoch had announced that he was closing the News of the World and Brooks resigned. James later stepped down from his two chairmanships and relocated to New York, as deputy chief operating officer of News Corp.

The scandal did not recede. To date, eighty-seven people have been arrested, many of them News Corp. employees. Elisabeth had planned to join the board of News Corp. after its purchase of Shine; in the summer of 2011, she withdrew her name from consideration; she later gave up her title as Shine’s C.E.O. Reporters who had largely ignored the hacking scandal while the Guardian, often alone, pursued it now clamored for her to comment. Between the fall of 2011 and the summer of 2012, she was silent. “The people I wasn’t quiet with,” she told me, “were my dad and brothers and Chase”—Chase Carey, the chief operating officer of News Corp.—“and some members of the board.”

Finally, in August, she went public. Invited to the Edinburgh International Television Festival to give the prestigious annual MacTaggart lecture, she spoke about the need for “strength of character,” and was openly critical of her brother James and of News Corp. James felt betrayed, Elisabeth told me; her father, who had seen the adulatory press that her speech garnered, refused to read it.

For years, the house of Murdoch has managed to conceal its internal divisions. Lachlan, the middle of Rupert’s three children from his second marriage, was assumed to be his father’s heir apparent at News Corp., but in 2005 he left the company over what he felt was his father’s micromanagement. He moved to Australia, and although he remains on the News Corp. board, he has busied himself with his own media investments. James, the youngest, became the new heir, but he has always resented that Lachlan was their father’s favorite. Elisabeth, the oldest, left News Corp. twice, in part because she felt that the company was less welcoming to her than to her brothers.

Her MacTaggart lecture amplified speculation about the future of the dynasty. Some of Rupert Murdoch’s advisers believed that Freud was waging a campaign to position his wife as her father’s successor, perhaps with her complicity. Word reached Elisabeth that her father had begun saying privately that he hoped Elisabeth would divorce Freud. The two men rarely speak, and James barely talks to Elisabeth; Freud is convinced that Elisabeth was held back at News Corp. by her gender. One family friend compared Elisabeth to Cordelia, King Lear’s devoted daughter, whom he banished. “She loves her father,” the friend said, “but she’s the wrong sex.”

Murdoch and Freud bought their Burford home—a Jacobean estate on twenty acres—in 2008. The house is so large that when Murdoch took me on a tour, on the last Sunday in September, she claimed not to know how many rooms it contains. Nearly every room has a stone fireplace and windows overlooking flower or vegetable gardens. In her office, on the second floor, are oil portraits of her father and her husband; the walls of Freud’s adjoining office are covered with framed historical documents, including the Instrument of Abdication, the 1936 letter from King Edward VIII relinquishing the throne in order to marry Wallis Simpson. Attached to the main house is a restored seventeenth-century chapel. There is also a long outdoor lap pool, an indoor pool and recreation center, and a gym. Freud showed me the vast basement wine cellar, which contains thousands of bottles of wine and champagne; the garage, where he keeps a 1963 white Jaguar convertible that he says he has driven at a hundred and forty miles an hour; and a kitchen equipped to service a restaurant.

Murdoch’s hair is blond and shoulder length, her features sharp and suggestive of those of her mother, Anna. Relaxing in the kitchen, Murdoch wore dark slacks, a crewneck sweater, and black sneakers, but no makeup. Freud, who has deep hollows under his eyes, was dressed in a black hoodie, jeans, and gray sneakers. The paraphernalia of six children from three marriages—backpacks, books, electronics—was strewn about. Freud is an accomplished cook. As he sipped a 1998 Pomerol, he prepared a luncheon of filet mignon, fettuccine with crab, leeks sautéed in crème fraîche, sautéed sausages embedded in pastry, curried-chicken salad, roast potatoes, and broccoli.

Murdoch is forty-four. Freud is forty-nine and is not only the great-grandson of Sigmund Freud but also the nephew of the artist Lucian Freud and the son of Sir Clement Freud, who was a Member of Parliament and a renowned writer, wit, chef, and TV personality. Freud and Murdoch met in 1997, at a business breakfast in London. Murdoch was pregnant with her second child, as was Freud’s wife, Caroline Hutton, with hers. At the time, Murdoch was the director of programming of BSkyB, which was represented by Freud’s public-relations firm. Their first encounter was “a car crash,” Freud told me, “a very, very, very strong and intense draw.” She and Freud “clicked intellectually,” Murdoch told me, but she said that no immediate romance ensued. Nevertheless, she said, “I loved his mind. I loved his intensity. I found him incredibly attractive. I can talk to him. We think alike. We have similar enthusiasms for people and ideas.”

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Each had struggled to impress domineering fathers and to learn to carry the weight of a famous family name. “You are not allowed to walk into a room without people pointing at you,” Freud said. “You feel either entitled or unworthy.” Channelling his inner Sigmund, he said that he and Murdoch shared a “very strong primal yearning for an identity that is your own.” They have been christened “the golden couple” by the British press. Yet with little public notice they have become almost a fifth column within the Murdoch empire, challenging the journalistic ethics of News Corp. and establishing her independence.

Elisabeth was born in Australia, where Rupert Murdoch was raised and built a newspaper empire out of two papers he had inherited from his father. She spent most of her first five years in England, as her father bought and expanded the News of the World and the Sun. (He later bought two upscale papers, the London Times and the Sunday Times.) When she was five, the family moved to New York, as Murdoch acquired first the San Antonio Express-News and, soon after, the New York Post. He prevailed upon friends to support Elisabeth’s application to the Brearley School, where she credits the teachers for giving her “a bit of a kick.” Her father was busy and was short on compliments but “very affectionate,” Elisabeth insists. She watched television voraciously, especially reruns of “I Love Lucy,” “The Brady Bunch,” and “The Partridge Family.” Wary of criticism of her father, she refused to read the harsh press he attracted for popularizing savage tabloid journalism and for allowing his strong conservative views to bleed into news columns.

When Murdoch was in the seventh grade, her mother announced that they were selling their Fifth Avenue apartment and moving back to Australia. Elisabeth was dispatched to the boarding school that her father had once attended. Lachlan and James, who were three and four years younger, were allowed to remain in New York with their parents to finish the school year. Asked why she was sent and not also her brothers, she said, “I don’t know. I never asked that question.”

She was terribly lonely. Some months later, her mother called to say that the family had decided to stay in New York. Elisabeth spent a year at a boarding school in Connecticut, then was readmitted to Brearley. Her political passions diverged from her father’s. He was enamored of Ronald Reagan and Margaret Thatcher; she lionized Nelson Mandela and volunteered for the Gay Men’s Health Crisis. (In the recent election, she supported Barack Obama and he supported Mitt Romney.) In 1986, she enrolled at Vassar College, and the next summer she interned at Sky News in London, then came back to volunteer for a public-access cable-news channel at Vassar. As a senior, she became romantically involved with Elkin Kwesi Pianim, the son of a Dutch mother and a Ghanaian businessman and economist who had been imprisoned for ten years for opposing a dictatorial regime.

When she graduated, in 1990, she began preparing to join the family business. “I never really questioned it, I suppose,” she said. With her father’s support, she moved to Australia to learn television at the independently owned Channel Nine, then the country’s leading broadcast network; Pianim, who was two years younger, stayed behind to finish his degree in economics. “Australian television was a bit like the world of ‘Mad Men,’ ” she said in her MacTaggart lecture. “There was a bar in the boardroom, salesmen drank Martinis at lunch, and there was not a single woman in senior management.” Two years later, she joined News Corp., moving with Pianim to Los Angeles to work in the programming department of the Fox TV-station group, the backbone of the new Fox network. At twenty-six, after a brief stint as the program director of a small Fox station in Salt Lake City, she married Pianim and joined the programming team at FX, Fox’s new cable channel.

After a year, Murdoch yearned to demonstrate her entrepreneurial mettle. “I felt I wanted to be my own boss,” she said. With a bank loan guaranteed by her father, she and Pianim bought two small NBC-affiliated stations in central California. They quickly increased profits by improving local news and programming, boosting ad sales, and reducing the staff. A year later, they sold the stations and made a profit of twelve million dollars. They had their first child, and, not long after, Elisabeth decided to apply to Stanford Business School. When she called to tell her father, she says, he replied, “You don’t need a fucking M.B.A.! I’ll give you an M.B.A. What you need to do is to go to London and work for BSkyB and see the amazing things they’re doing to introduce digital television.”

In London, her new boss was Sam Chisholm, the C.E.O. of BSkyB. She was responsible for marketing, scheduling, and program acquisitions, but she came to feel that “there was no real job for me. Sam was probably told, ‘Lizzie’s coming.’ My dad wanted to give me an opportunity,” yet he was “weirdly embarrassed by any sniff of favoritism and nepotism—it’s just not his character.” The atmosphere, she says, was “very boys-y.” The slow pace of her ascent at BSkyB “possibly knocked my confidence and made me ask, ‘What am I not doing to get ahead?’ ” Meanwhile, her younger brothers had been elevated to bigger jobs. Lachlan rose from publisher of the Australian to publisher of the New York Post and deputy chief operating officer of News Corp.; James, after dropping out of Harvard and entering the music business, ran Internet operations for News Corp. and was promoted to C.E.O. and chairman of STAR TV, the company’s satellite-television holdings in Asia. One veteran associate of Rupert Murdoch’s describes Elisabeth as “very much blocked by her brothers in the sense of not having a voice. Rupert is not the most female-engaging executive.” Although he has had female executives to whom he entrusted great responsibility, including Rebekah Brooks, this was not the case with Elisabeth. “I’m competitive with myself,” she said. “I am one hundred per cent not competitive within my family.”

By early 1997, Elisabeth Murdoch wanted to leave BSkyB, but, she said, “I probably didn’t have as much confidence in myself as I do now. I was not assertive. I felt I had to prove something to myself by being on the outside.” But her father loomed large, and she believed that if she left BSkyB “he would feel I failed.”

In March, she met Freud. Within six months, photographs of the pair began appearing in British tabloids, and news stories speculated about an affair. (The buzz was heightened by the news, in 1998, that Murdoch and his wife had separated and that he was dating an employee, Wendi Deng, whom he eventually married.) A year later, Freud and Murdoch separated from their spouses; each had two children. Wracked with guilt—“I was an adulterer,” he told me—he broke off the relationship in 2000, even after Elisabeth became pregnant with his child. They reconciled, but then split up again after the baby was born.

They finally married in August, 2001, in a lavish ceremony at Blenheim Palace, in Oxfordshire. Lachlan and James Murdoch gave humorous, off-color speeches. Rupert offered a warm toast that was written, like many of his speeches, by Brooks, who was treated by him as a daughter and by Elisabeth and James as a sister. James was his father’s trusted business arm, while Brooks served both as his conduit for information and as his enforcer. When Brooks was editor of the Sun, Clare Short, a former Cabinet minister, lambasted the paper for daily featuring bare-breasted women on Page 3. Brooks ordered a “Hands Off Page 3” campaign that displayed Short’s head atop a fat, naked figure; Short was described as “ugly” and “short on brains.”

In the autumn of 2001, with Freud’s encouragement, Elisabeth left BSkyB to start an independent television company, which she gave an “inspirational” name: Shine. “She needed to know if she was any good,” Freud said. “She knew people wondered if she was at Sky because of Daddy.” Her father, she said, “thought I was completely insane.”

That same year, Shine signed a production deal with BSkyB; the broadcaster took an initial five-per-cent stake, and agreed to air some of the company’s shows. Sony acquired a twenty-per-cent stake and became a distribution partner. Elisabeth raised additional funds from venture-capital firms. Rupert Murdoch’s interest in television was monetary. Hers was more subjective. “I am firmly with Dennis Potter when he said the job of television is to make hearts pound,” she declared in her MacTaggart lecture, invoking the creator of “The Singing Detective,” “Pennies from Heaven,” and other television classics. She told me, “My approach to content, no matter what genre of programming, is that it must come from a real desire to connect to an audience.”

She did inherit her father’s ambition. In 2008, to transform Shine into a global enterprise, she acquired Reveille, an American company founded by Ben Silverman, a former chairman of NBC Entertainment; Reveille had produced the U.S. version of “The Office.” Shine also acquired several U.K. and European production houses. The company now has offices in ten countries and has sold programming in more than a hundred. Freud worried that she was overextending the company. “But she did it,” he said, because she has “balls.” In the U.K., Shine sold dozens of dramas and reality shows to the BBC, and to four commercial networks: Sky, Channel 4, Channel 5, and ITV. “She did a pretty terrific job in television,” Michael Lynton, the C.E.O. of Sony Entertainment Group, said. “Most of the growth was organic. Our hope at the time was that there might come a time when she would sell the business to us. There was even a discussion of her running our television production business for us outside the United States.” But Elisabeth was intent on maintaining her independence.

Rupert Murdoch’s business associates were impressed. “She combines the best of her brothers in one package,” one longtime associate of Murdoch’s said. “She has the brains of James and the heart of Lachlan.” Her father boasted to colleagues of her television-programming instincts. She remembers calling him one night in late 2001 after watching a popular British TV show, “Pop Idol.” It was a Saturday evening “and the entire country was watching the show,” she said. “I called Dad because I was so excited about it. ‘Dad, I don’t know if anyone at Fox knows about this show, but I’m telling you that you have to buy this show.’ ” The people at Fox were skeptical, until Murdoch asked to see the show and then ordered them to buy the rights. For the past ten years, “American Idol” has been the top-ranked TV show in the U.S.

Murdoch and her C.E.O. at Shine, Alex Mahon, organize four retreats each year where executives from headquarters and from Shine’s worldwide offices gather. The first day of the retreat this past October was held in a building a few blocks from Shine’s London offices, in Primrose Hill. Murdoch arrived after most of the executives, who were chatting over coffee in a conference room. She moved from one to another, offering hugs and asking about their families, then sat down at the middle of a long table, where she mostly listened. The next day, at an inn in Winchester, an hour outside London, she talked to some eighty executives about the many issues facing Shine, glancing from time to time at notes she had made on index cards. Afterward, they split into groups to discuss and then present to the larger group their views of Shine’s challenges and priorities.

“I think Liz inspires people,” Carl Fennessy, the Australian-born C.E.O. of Shine America, said at one point. “I thought that because she’s a Murdoch she’d be more guarded.”

Today, the Shine Group produces twenty-four scripted shows, ranging from the ambitious (“The Bridge,” a Swedish crime drama with political intrigue and a semi-autistic female detective who, like Claire Danes’s character in “Homeland,” is both brilliant and odd) to the mundane (“Plus One” follows a man whose girlfriend leaves him to marry a boy-band star). The company produces a hundred and fifty-four non-scripted reality shows, including “Too Hot for Love,” “Celebrity MasterChef,” “Junior MasterChef,” “MasterChef All Stars,” and “Jewish Mum of the Year.”

Jonathan Miller, a former C.E.O. of Nickelodeon U.K. and, until recently, a senior executive at News Corp., explained how Murdoch had built up Shine so quickly. Two franchise shows—“MasterChef” and “The Biggest Loser”—“could be made anew in country after country,” he said. “That’s a really good business model.”

By 2010, with the industry consolidating, Murdoch felt that Shine needed more capital in order to grow. She spoke to her father and his chief operating officer, Chase Carey. At Carey’s suggestion, she met with him and the chief financial officer, David DeVoe, several weeks later, in London. Carey and DeVoe proposed that News Corp. buy out Sony and become a fifty-fifty partner. “I went back to Chase and said, ‘We should talk about a full acquisition,’ ” she told me. She believed that it would be a conflict of interest for her, as a shareholder in News Corp., to sell Shine to a News Corp. competitor. Shareholders of one or the other company would always have reason to question where her fiduciary responsibilities lay.

In the spring of 2011, News Corp. acquired Shine and its eight hundred employees for six hundred and seventy million dollars, with about forty per cent going to Elisabeth Murdoch. She stepped down as C.E.O. the following year but continues to guide the company as chairwoman; she does not take a salary. Aside from their initial conversation, her father was not involved in the purchase, she said. Freud opposed the sale. “I am unbelievably proud of my wife,” he said. “She worked really hard to be Liz Murdoch, as opposed to a Murdoch.” A lawsuit filed by News Corp. shareholders asserted that the company overpaid for Shine, claiming “rampant nepotism” and accusing Rupert Murdoch of treating his public company “like a wholly owned family candy store.” (Both Elisabeth and a spokeswoman for News Corp. said that independent directors on the News Corp. board had validated the price after receiving a report from an expert on evaluation, and Elisabeth added, “It was a spot-on market rate.) The London Evening Standard ran the front-page headline “MURDOCH’S DAUGHTER TO GET £370M FROM DADDY.” Several days later, at a party for the film “The King’s Speech,” Freud, who is known to have a volatile temper, approached the paper’s editor, Geordie Greig, and exclaimed, “How dare you insult my wife?,” and flung his Martini in Greig’s face.

The four-story London building that houses Freud Communications, at 55 Newman Street, is starkly modern. When the elevator door opens to Freud’s fourth-floor glass-walled office, visitors must step over an Antony Gormley sculpture of a man with outstretched arms sprawled on the marble floor. Freud’s office walls are covered with commemorative pictures, family photos, a Damien Hirst painting, and three Lucian Freud charcoal portraits. The green velvet couch and a green glass conference table are more decorative than comfortable.

Freud has become an active champion of Elisabeth’s business ventures. On the rare occasions when she speaks to the press, he often makes the arrangements and tries to monitor the ground rules. As Jane Martinson, of the Guardian, was transcribing a recent interview with Elisabeth, Freud called her and shouted that he didn’t like some of her questions, she said, and he implied that it was the last interview he would set up for her. (Freud says that he only yells at reporters if they stray beyond the parameters they had agreed on.)

By most measures, Freud is not suited to the role of quiet advocate. “Matthew is a disrupter, a provocateur,” Edward Amory, a director of Freud Communications and a former Daily Mail commentator and Tory staffer, said with admiration. “It’s a funny role for someone running a large company, but Matthew thinks his role is to shake things up. I thought P.R. was catching bricks thrown by others. There’s a part of Matthew that likes to throw bricks.”

Freud grew up in a noisy home, the youngest of five children, three of them boys. His father, Clement, was a Liberal Party M.P. for fourteen years; before that, he had had a varied career as a celebrity TV chef, a panelist on the popular radio show “Just a Minute,” a sportswriter, a broadcaster, an author, a pitchman in dog-food commercials, and a part owner of a night club. He was a curmudgeon—gruff on the telephone, rude to waiters, disdainful of his children. “He was incredibly narcissistic,” Freud recalls.

As a young student, Freud was seen as more cunning than bright. “He had no understanding of the relationship between working hard and doing well,” his sister Emma, a scriptwriter and broadcaster, wrote in an e-mail. “He thought that if he could be in the right place at the right time with the right bit of luck on his side, then he might have a chance of getting away with it.” She described an early entrepreneurial effort at a local fair, when Freud was about nine. “Matthew had a stall and was selling mice for fifty pence,” she said. “He didn’t do well on the first day, so he changed his marketing tactics. He sold the mice for ten pence to small children who were wandering around on their own. Then, when the parents brought them back in horror, he charged the parents a pound to take the mice back.”

Freud’s grades at the Westminster School were dismal; he transferred to a state school and dropped out in his junior year. When he was sixteen, his parents shipped him off to Ann Arbor, Michigan, where they had friends. Not long after he returned to England, he was arrested and charged with possession of cocaine with intent to sell; the judge let him off with a fine. “I feared a seven-year prison sentence,” Freud told me. “That sort of focussed the mind.”

He skipped college and chose a profession pioneered by his great-uncle Edward L. Bernays, the founder of modern public relations, whose father was the brother of Sigmund’s wife and whose mother was the psychoanalyst’s sister. Matthew’s first job, in the public-relations department at RCA Records, lasted two years. In 1985, at twenty-one, he established his own firm, Matthew Freud Associates, handling second- and third-tier actors and performers. His first major client was the Hard Rock Café, followed by Planet Hollywood, which granted stock options to Bruce Willis, Sylvester Stallone, Demi Moore, Arnold Schwarzenegger, and other celebrities. Freud used their names to draw crowds to Planet Hollywood, and to set up interviews for reporters.

Matthew Freud Associates became the agency for film studios and for Pepsi, Mars, and Nike, which sought to associate their brands with Freud’s celebrities. He was approached by stars wanting to extricate themselves from a jam, among them Geri Halliwell, who sought a smooth separation from the Spice Girls, and Guy Ritchie, who wanted to tamp down publicity surrounding his divorce from Madonna. He volunteered to help Bob Geldof and Richard Curtis, the longtime partner of Emma Freud, organize the Live 8 concerts, and he helped engineer Product Red, Bono’s global campaign to fight AIDS. His firm now employs almost three hundred people, and his client list includes Walmart, Sony, the Gates Foundation, and the European magazines of Condé Nast.

In 1993, Jonathan Miller, who credits Freud with an ability to “formulate ideas that will capture people’s attention,” retained him to help promote Nickelodeon’s début on BSkyB. England was about to launch a national lottery, and Freud suggested that Nickelodeon start a kids’ lottery in partnership with Toys R Us; winners got a shopping cart and two minutes of free shopping at any outlet. The channel’s audience soared, as did its advertising.

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In 1994, Freud sold his company, for nineteen million dollars, to an advertising firm, only to buy it back seven years later. In 2005, he sold slightly more than fifty per cent of the company to the communications giant Publicis, and bought it back again in 2011. He branched out to the United States, opening offices in New York and Los Angeles, but by 2009 he had abandoned the effort. Critics say he failed because he was banking on his relationship with Murdoch. “Matthew is a very shrewd operator,” Olivier Fleurot, the C.E.O. of the MSL Group at Publicis, said. “What makes him successful in London are his amazing connections in business and politics, being a Murdoch son-in-law, being close to Murdoch’s newspapers, and being Sigmund Freud’s grandson. The cocktail, which worked very well in London, didn’t work in New York.” Freud says that he didn’t fail, insisting that the offices in the U.S. were profitable.

Over the years, Freud has become close to powerful politicians. When Tony Blair, the Labour Prime Minister, left government, Freud eased his transition to private life by providing office space. When David Cameron was campaigning to be Prime Minister and wanted to court Rupert Murdoch, Freud flew Cameron and his wife on his private jet to dine on Murdoch’s sailboat, moored in the Greek isles. Blair acknowledged that Freud might be considered controversial among some members of the Labour Party, who resent him for transferring his loyalties to Cameron. But when we met in his office in London, Blair said, “When you’re in his business, part of your job is to get along with everyone.”

The A-list dinners hosted by Freud and Murdoch have advanced both of their business interests and have added to the impression that their ambitions are entwined. New York’s Mayor Michael Bloomberg has attended, as have Mick Jagger, Andrew Lloyd Webber, Gwyneth Paltrow, King Abdullah of Jordan, and Hollywood studio chiefs. Many of Murdoch’s TV customers attend, as do Freud’s current and prospective clients. In the U.S., New York is the center of business, finance, media, and the arts, and Washington is the center of government. London “is New York and Washington combined,” says Sir Howard Stringer, the chairman of Sony, who has a home in Oxfordshire and who, with his wife, has attended parties hosted by Freud and Murdoch. “It’s a very intimate, almost incestuous place. And Matthew knows everybody.” The longtime Murdoch associate says of Freud, “He has phenomenal convening power.” The former Labour Cabinet minister Tessa Jowell describes him as “a conductor and connector,” mixing and matching people at his home.

The press tends to be less flattering, sometimes referring to him as a Svengali, “St. Matthew of the Shadows,” and “Matthew Fraud.” The editors of two London newspapers described him as manipulative; some reporters complain that he is a bully. He has invited journalists to movie screenings and served them cheaper wine while he and select friends drank a good claret. At the night club Annabel’s, in London, in 2010, a host asked the actor Hugh Grant if he knew Freud; Grant said, “I hate him.” Freud, who was standing just a few feet away, smeared a piece of chocolate cake on Grant’s white shirt; Grant punched him in the eye.

The brash Freud eventually came into conflict with the Murdoch family. In January, 2010, the New York Times published a story about the success of Roger Ailes, the founder of Fox News, revealing that Fox was expected to make a profit of seven hundred million dollars that year, more than the combined profits of CNN, MSNBC, and the evening newscasts of CBS, ABC, and NBC. It also reported that “more liberal members” of the Murdoch family were unhappy with Fox News. The only family member quoted was Freud. “I am by no means alone within the family or the company in being ashamed and sickened by Roger Ailes’s horrendous and sustained disregard of the journalistic standards that News Corporation, its founder and every other global media business aspires to,” he told the Times.

Freud’s firm earned almost three million dollars from News Corp. between 2006 and 2011, when it was on retainer, Bloomberg Businessweek reported last year. Freud’s remark infuriated Rupert Murdoch, who was unaware that it was not spontaneous, that in fact it was a written response to a Times reporter. “The question is to what extent was Elisabeth complicit in that?” one Murdoch adviser said to me. Elisabeth says that she learned about Freud’s comment only after he said it. At the time, she e-mailed Ailes to say that her husband had “gone rogue” and that, although “I may not agree” with everything on Fox, “I’m a big admirer of yours.” Recently, I asked Ailes, who in October signed a lucrative new four-year contract with News Corp., how he would respond to Freud. “I was told but don’t know for sure that Sigmund Freud had a vasectomy in 1927,” he replied in an e-mail. “Obviously not soon enough.”

Later in 2010, as the News of the World scandal metastasized and several of his clients found that their phones had been hacked, Freud and Elisabeth urged Rupert Murdoch not to dismiss the hacking as common industry practice and not to pay hush money to settle claims by hacking victims. Investigate and punish the miscreants, they advised; turn over e-mails and documents to the authorities; don’t risk a coverup.

James Murdoch and Rebekah Brooks ignored the advice. They attacked critics, blaming a few rotten apples, and Rupert Murdoch stood squarely behind them, even as Scotland Yard announced that it had received “significant new information.” The issue to Elisabeth, she told me, was “How do we change the conversation? How do we get this company to heal and move on? How do we restore trust?” In an effort to rebuild their fraying relationship, Rupert Murdoch initiated a series of meetings with a professional facilitator and his children, including Lachlan, James, Elisabeth, and Prudence, his daughter from his first marriage. By early 2011, they had dropped the effort.

In the weeks leading up to her MacTaggart lecture, in August, Murdoch read past lectures in bed late at night, including one by her father, in 1989, and one that James had given, in 2009. She consulted historians, friends, and television colleagues in an attempt to strike a balance between condemning News Corp.’s behavior in the hacking scandal and extolling the virtues of the organization, which was both her father’s company and Shine’s parent company. The core of her speech would be about the importance of programming. Her friend Henrietta Conrad, the chairman of Shine U.K., estimates that she read eight drafts of the speech; Freud probably read more. Referring to Murdoch’s previous refusal to comment publicly about the News Corp. implosion, Freud told me, “The thing that made the MacTaggart lecture more bearable was that it allowed her to be silent with more dignity. She had made an appointment with her industry to speak out.” Murdoch described it to me as “a personal speech,” an announcement of “who Liz is.”

In her introductory remarks Murdoch characterized her preparations for the talk as “a welcome distraction from some of the other nightmares much closer to home.” She was the first woman to give the MacTaggart in seventeen years, and she chided her sponsors for not inviting more women to speak. In 1989, Rupert Murdoch, in his MacTaggart lecture, had emphasized his give-the-people-what-they-want philosophy and his opposition to government-funded media like the BBC. In contrast, Elisabeth spoke of “the power of television to form human connections. This was my purpose.”

In explaining why she believed that her father’s company would prove to be a suitable home for Shine, the enterprise she had spent eleven years building, she said that News Corp. “is first and foremost a content company, and it believes in taking long-term investments in creative risks.” She lauded it for building a fourth television network in the U.S., for believing in “The Simpsons,” Seth MacFarlane, and “Glee,” and for risking huge sums to back James Cameron’s “Titanic” and “Avatar.” Yet she conceded that News Corp. was “asking itself some very significant and difficult questions about how some behaviors fell so far short of its values.” She added, “I believe one of the biggest lessons of the past year has been the need for any organization to discuss, affirm, and institutionalize a rigorous set of values based on an explicit statement of purpose.”

She referred to her brother’s 2009 MacTaggart lecture, a highly charged argument for the free market and against public financing, in which he described Britain’s broadcasting environment both as “creationism” (“the belief in a managed process with an omniscient authority”) and as “authoritarianism”—a dig at the BBC. It carried strong echoes of their father’s speech, which argued that broadcasting should be freed from “the bureaucrats of television” and “the dominance of one narrow set of cultural values” and placed “in the hands of those who should control it—the people.” James ended by declaring that profit is the only reliable guarantor of a company’s independence.

Elisabeth acknowledged that he was partially correct but took issue with this line of thought. “Profit without purpose is a recipe for disaster,” she said. She continued, “It’s us, human beings, we the people, who create the society we want, not profit. It is increasingly apparent that the absence of purpose—or of a moral language—within government, media, or business, could become one of the most dangerous own goals for capitalism and for freedom.” She added, “Independence from regulation and the freedom we need to innovate and grow is only democratically viable when we accept that we have a responsibility to each other and not just to our bottom line. Profit must be our servant, not our master.”

James and Rupert had excoriated the BBC; Elisabeth extolled its universal license fee as “a strategic catalyst to the creative industries of this great country.” (She did not mention that BBC channels have bought twenty of Shine’s programs.) Nevertheless, she held up her father as a champion of democracy: “My dad had the vision, the will, and the sense of purpose to challenge the old world order on behalf of ‘the people.’ ” Going forward, she said, “we have to acknowledge and dedicate ourselves to our purpose, which is to tell great stories, to inspire our audience, and to contribute to a sense of community.”

Her speech was “hailed with warm applause and whistles from the audience,” the Guardian reported. Tessa Jowell told me, “A lot of people thought it was crazy to invite her, and for her to accept,” but after the speech Elisabeth was no longer seen as just a Murdoch. “People were forced to see Liz as one of the most creative people in the media industry.”

Not everyone was enthralled. A Guardian editor in attendance described it as a “clever” speech that shouted, “I’m the nice Murdoch.” She might praise Dennis Potter, but Shine has yet to produce a program of Potter’s calibre.

After the lecture, Elisabeth had one regret. “I should have said more positive things about James,” she told me. But she boasted, “Ninety-nine point nine per cent of the reaction was very positive. My team was overjoyed. I had notes from complete strangers. I think some of the nicest things were to get letters and e-mails from competitors saying, ‘Thank you.’ They were proud after the speech. The only person who didn’t like my speech—who told me so—was my dad.” They did not speak for nine weeks, and finally did so only after Rupert Murdoch’s close friend Robert Thomson, the editor of the Wall Street Journal, pressed her to call her father. “I think he realized it was not a loving reaction,” she says of her father. When she was in New York in mid-November, she went to her father’s home for dinner. She did not see James, with whom she has not had a personal conversation for many months, although they do speak occasionally about business matters. Tony Blair, who is close to both Elisabeth and her father, thinks that she succeeded in walking a fine line. “She’s intensely loyal to her father and her family,” he said. Invoking his own approach to reconciling warring factions, he added, “I read it as trying to find a middle way.”

For the Murdoch empire in England, a middle way no longer seems viable. In the aftermath of the hacking scandal, Rupert Murdoch closed the News of the World and was forced to withdraw a bid to acquire the sixty-one per cent of BSkyB that he did not already own. James was compelled to step down as the chairman of BSkyB, although he was overwhelmingly reëlected to the BSkyB board in November.

After a long investigation, a parliamentary committee issued a hundred-and-twenty-one-page report that concluded that Rupert Murdoch is “not a fit person” to run an international company. Politicians who curried favor with Murdoch and supported his expansion in the U.K. now shied from being photographed alongside him. Murdoch has said publicly that he no longer views Great Britain as a primary investment opportunity, and, with newspaper circulation steadily falling, speculation has intensified that he might one day close the London Times and the Sunday Times, which, according to numerous accounts, are losing money. Murdoch had to break News Corp. into two companies, one comprising television, movies, and digital media, the other focussing on print and education. The division will highlight the paltry profit margins of the latter.

In July, 2011, Prime Minister Cameron, sparked by the hacking scandal, appointed Lord Justice Leveson to head a commission to investigate the failings of the British press and the often incestuous relationship between the media and government officials. Last Thursday, Leveson released a two-thousand-page report. It levelled harsh criticism at News Corp. and called for both a First Amendment-like law to protect freedom of the press and an official press watchdog to monitor press standards.

Rupert Murdoch could not rescue Rebekah Brooks, who is scheduled to go on trial in September, 2013, charged with “conspiracy to commit misconduct in public office,” three counts of phone hacking, and three counts of conspiracy to subvert justice. She remains a close friend of Freud and Elisabeth, who didn’t begrudge her rise in the company and appreciated her fealty to the Murdoch family.

I asked whether the behavior of Brooks and others at News Corp. wasn’t a reflection of the corrupted journalistic values that Elisabeth had taken issue with in her lecture. She collected her thoughts, folded her arms, and said, “Yes is the quick answer. But, at the same time, I’m a champion of the plurality of voices and diversity of audience, and I think that doesn’t mean that in certain cases behaviors cannot match one’s values.”

The days of lavish Chipping Norton-set parties are over. As one regular put it, “Who would come?” A British politician said of the future of News Corp., “I see it as like a political party at the crossroads. Which direction do they go in? What Elisabeth is articulating is not a negative view of the company but a way forward that deals with the public. There are others who view this as a bump in the road.”

Rupert Murdoch, who is eighty-one, abhors the gossip about his successor. Like Charles de Gaulle, he cannot imagine death knocking on his door. He maintains a careful diet, works out with a trainer, and reminds people that his mother, Dame Elisabeth, is a hundred and three years old. “When the Queen Mum died, at one hundred and one,” Roger Ailes recalls, “I said to Rupert, ‘She had a good run.’ ” Murdoch replied, “I’d call it an early death.”

Yet Murdoch has made it clear that when he does depart he expects that a family member will take over. For years, Elisabeth seemed to stand behind her brothers in the line. In a 2003 Times interview, a veteran colleague of the senior Murdoch’s said, “Rupert never talked about her. He always talked about his sons.” But the longtime Murdoch associate told me, “If someone had said to me in 2007, ‘Who should succeed Rupert Murdoch?,’ I would have said Elisabeth. Others agreed.” They wonder why she voluntarily took herself out of the running with her decision not to join the News Corp. board after the company bought Shine, and why she gave up her salary and her C.E.O. title at Shine.

“What I wanted to do is step into a pure Shine role rather than a News Corp. role,” Elisabeth told me. “It makes me a happier person.” She was sipping coffee in the living room of her London home, which occupies a former Victorian greeting-card factory near Primrose Hill Park. Murdoch had publicly said that she harbored “absolutely no ambition” to succeed her father. When I asked her if she considers herself a contender for her father’s job one day, she responded, “In what? The company is changing its shape so much. I think no one person will succeed him.” With the division of News Corp. into two companies, there will be two C.E.O.s, and maybe two chairmen. There are three siblings, and only two top jobs. Yet one could readily imagine her rejoining News Corp. to run the television-and-movie half of the business. Intentionally or not, she has positioned herself as a powerful contender for the role, and thus as a rival to James.

As for her company, Elisabeth said, “I would love to figure out how to build a Shine in the digital space. Hopefully, with Shine; I want to call it Rise.” She is convinced that video online will be huge. Already, YouTube and Amazon and Netflix are investing in original content. She sees this as a real growth opportunity for independent producers like Shine. And she notes that digital viewers are more appealing to advertisers. “The average YouTube viewer is twenty-six, versus the TV viewer, who is fifty-two,” she said. She has toured Silicon Valley and immersed herself in what digital companies are up to. In January, 2012, Shine acquired ChannelFlip, a London-based media company that produces short-form Internet video content. Several months earlier, she negotiated for Shine to buy Bossa Studios, a British Web-based social-gaming firm.

“She really understands that this new medium can mean a whole set of new audiences,” Eric Schmidt, Google’s chairman, observes. Barry Diller, who has known Murdoch since she was nine and who was Fox’s first C.E.O., called her “a superb businesswoman who went about consolidating the TV business in the U.K. before anyone else did. She built Shine. Without any question, she’s the most entrepreneurially accomplished person in that family, other than Rupert.”

I asked Murdoch a final question: How much of her drive was motivated by a desire to impress her father? “You’d love your parents to be proud of you,” she began. “Of course that influenced me. But not so much anymore, because I feel—how to say this?—I feel that I know who I am. Each time I tried to work in his company, he wasn’t impressed. I realized I had to just go and be myself.” ♦

Ken Auletta began contributing to The New Yorker in 1977 and has written the Annals of Communications column since 1993.